Scrapping of airfare caps causes gouging fears

A VnExpress survey on May 14 of 1,900 respondents on whether the price ceiling should have been removed by the Civil Aviation Authority of Vietnam on routes with three or more airlines found 43 percent saying "no" and 16 percent saying this is not the right time for it.

One of the biggest concerns is that airfares could become costly during peak travel seasons such as summer, Tet holidays and other holidays in the absence of price caps.

Duy Ha, owner of an air ticketing agency, said, "If price caps are removed, a round ticket between HCMC and Hanoi bought at the last minute during Tet could cost over VND10 million ($434)."

Previously it had been capped at just over VND8 million, he said.

People are also concerned about collusion between airlines to increase fares.

While in many countries there are no caps, people there, unlike in Vietnam, have other transport options like fast trains with service as good as on airplanes.

Several VnExpress readers have suggested that the aviation authority could remove caps on business class fares and keep them for economy to protect consumers.

A spokesperson for an airline said airfare surges are unlikely to occur since passengers have a choice between six airlines.

Assoc Prof Nguyen Thien Tong, head of the aeronautical engineering department at the HCMC University of Technology, while not opposing the removal, said it should not be done abruptly since travel companies have already fixed tour prices based on current fares.

"The authority should start by increasing the fare cap to test the reaction of airlines.

"If airlines really compete with each other, they will not collude to hike fares. Then the government can remove the caps on fares and stop its market intervention."

Dang Anh Tuan, marketing director of Vietnam Airlines, said: "Capping airfares is no longer appropriate since Vietnam has six airlines in operation. Vietnam, and some Southeast Asian countries like Indonesia and Thailand, are among the few countries in the world still having a price cap."

The government should only intervene when there is unfair competition or violation of the Competition Law, he added.